BioMarin Pharmaceutical Inc.
Q3 2017 Earnings Call Transcript

Published: 27 Oct 2017

[Operator:]

Good afternoon, my name is Sarah and I will be your conference operator, today. At this time I would like to welcome everyone to the BioMarin Pharmaceutical's Third Quarter 2017 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. I would like to introduce your speaker for today, Ms. Traci McCarty, Vice President of Investor Relations. Ms. McCarty, the floor is yours.

[Traci McCarty:]

Thank you, operator, and thank you all for joining us today. With me on today's call is J.J. Bienaimé, Chairman and Chief Executive Officer; Hank Fuchs, President, Worldwide Research and Development; Dan Spiegelman, Executive Vice President and Chief Financial Officer; Jeff Ajer, Executive Vice President and Chief Commercial Officer; and Robert Baffi, Executive Vice President of Technical Operations. To remind you, this non-confidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical, including expectations regarding BioMarin's financial performance, commercial products and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authority, availability of capital, future actions in the pharmaceutical market and developments by competitors, and those factors detailed in BioMarin's filings with the Securities and Exchange Commission such as 10-Q, 10-K and 8-K report. Now I'd like to turn the call over to BioMarin's Chairman and Chief Executive Officer, J.J. Bienaimé.

[Jean-Jacques Bienaimé:]

Thank you, Traci. Good afternoon, and thank you for joining us on today's call. So in the first three quarters of 2017, we made significant progress towards achieving our financial goals, progressing our development pipeline, and getting our six commercial products approved and launched in both the U.S. and Europe. In addition, we are pleased to let you know that since R&D Day, the Brazilian Ministry of Health has initiated their purchasing process, which is expected to result in revenue this quarter and – as was originally expected in the third quarter. So based on this update, we can reaffirm that the total revenues for the full year 2017 are expected to be within current guidance. With the confirmation of top line guidance and continued expense controls, we are also pleased to report that we have increased non-GAAP income guidance for the full year, now sitting at between $60 million and $80 million, and Dan will provide more details and other updated guidance in a moment. So we want to thank those of you who were able to attend or listen to our R&D Day last week, and I would like to provide a brief overview of key updates for those who were unable to be there. So the depth of our research and development capabilities were on display with each presentation, from the announcement of our next IND candidate to the details of our global Phase 3 program with BMN 270, now known as valrox, now that we have the green light from both the U.S. and the UK health authorities to initiate enrollment this quarter, definitely before the end of the year. So going forward, we will be referring to BMN 270 as valrox, the nickname for our International Nonproprietary Name, or INN, valoctocogene roxaparvovec. So you understand why we want to use a nickname. So to summarize the updates provided last week, and starting with pegvaliase, as we said, with almost 700 patient years of therapy, we have learned how to effectively dose titrate PKU patients for maximum benefit. The level of experience we have with pegvaliase provide us with important background as we move through the regulatory process with U.S. health authorities. Importantly, based on guidelines in the 21st Century Cures Act that was signed into law last December, patient engagement has taken on a very prominent role in the FDA review process for orphan drug applications. Specifically, sections in the legislations encourage the collection of patient 60 years (4

[Jeffrey Robert Ajer:]

Thank you, J.J. I am very pleased with the commercial team's execution in the first three quarters of 2017, generating a 17% increase in total revenues year-to-date. Before reviewing specific product revenues, I'd like to provide an update on the Brineura launch following approvals in the U.S. and Europe in the second quarter. As of the end of the third quarter, we were pleased to have achieved sales in five countries

[Daniel K. Spiegelman:]

Thank you, Jeff. Earlier today, we issued a press release summarizing our financial results for the third quarter, and I refer you to that release for full details. Starting with top line results, J.J. and Jeff have already mentioned our third quarter revenues, so I'll highlight the total revenues for the first three quarter of 2017 were a record $955.3 million, an increase of 17% year-over-year, driven by strong contributions from all of our marketed products. As we have said previously, we expect top line growth over the next few years to be around 15%, and we expect to track toward that goal until contributions from the vosoritide and valrox takes us above that level starting the next decade. One specific, in July 2017, we received a $35 million onetime upfront payment from Sarepta Therapeutics related to the license and settlement agreements resolving the exon-skipping patent litigation. This amount, net of a 10% payment to a third party, has been recognized as revenue under royalty and other revenues in the third quarter. In terms of net product revenues, revenues based on commercial results described by Jeff, we are confirming total revenue guidance to be between $1.29 million to $1.32 billion for full year 2017, an increase over 2016 of between 15.5% and 18.2%, consistent with our multiyear target of 15% annual revenue (20

[Operator:]

Thank you. Your first question comes from Alethia Young with Credit Suisse. Alethia Young - Credit Suisse Securities (USA) LLC Hey, guys. Thanks for taking my question, and congrats on getting that order in. I guess I just want to talk a little bit more about LatAm in general. Is there a way to kind of put provisions in place where there's less volatility or arrangements with the government? Is that even a possibility? And then maybe, can you just talk a little bit about like any potential opportunities you see to kind of improve the treatment around the Kuvan population? I'm just kind of thinking about it in terms of the PEG-PAL coming up, and the launch you have there. Thanks.

[Jeffrey Robert Ajer:]

So maybe I'll take the first one, Alethia, on Latin America and smoothing out the volatility there. Yeah, our principal markets in Latin America, Brazil, Colombia, Argentina, Chile, and Mexico, they all have different ordering systems. The biggest volatility is driven by Brazil, and a lot of that volatility has happened historically. So the timing and the size of what are now, and have been for the last several years, consolidated purchases from the Federal Ministry of Health, so sometimes they order three months of supply, sometimes they order five months of supply, and then we then miss a quarter of orders. And the situation has then become more acute this year, as the Brazilian economy is in its third year of recession and the budget crisis for the government has kind of hit new highs. So we're looking at alternative pathways within the government, but really what we're trying to do is manage to continued supply of product for our patients. And just to highlight, as we noted in the prepared remarks, our sales concentration, or percent of revenues in Brazil, has really decreased over the last five years and will probably going forward. So Brazil will be less of an actor in our global portfolio of markets. Maybe I would turn the second question of Kuvan and PKU management. Was that a clinical a question or a commercial question No idea (27

[Jeffrey Robert Ajer:]

Okay. Maybe I'll start with that one, and if Hank has anything to layer on afterwards. So, with exclusivity of Kuvan in the U.S. through 2020 and in Europe in 2024, we really see the opportunity to have two differentiated therapeutic options for PKU patients. As you can tell, our Kuvan sales continue to grow at a fairly rapid pace, even though it's been on the market for a long time. So we've really had some success in terms of penetrating the PKU market and more importantly, changing the way clinicians are viewing the treatment of PKU and including adults. So we're really – I'm really bullish about the opportunity of having a more powerful therapeutic agent that's targeted towards adults, and it happens that it's exactly the adult population that is the least penetrated with Kuvan. So, through those exclusivity loss periods, I think we have a great opportunity to really transform the treatment of PKU with multiple therapeutic options from BioMarin. Hank, would you add anything to that?

[Henry J. Fuchs, M.D.:]

No. If I understand the question, I think the two other things that could really help young patients with PKU beyond Kuvan would be potentially pegvaliase. Once we get through the regulatory process in adults, we can start to think about how to introduce pegvaliase into a progressively younger population, where that stronger efficacy that Jeff noted could be very important, especially in a context in which medical nutritional therapy is not required because of how, well, naturally active (29

[Operator:]

Your next question comes from Robyn Karnauskas with Citigroup.

[Unknown Speaker:]

Hey, guys. This is Kripal (30

[Jean-Jacques Bienaimé:]

Robert, you want to answer that question? Maybe I'll give my insights, too.

[Robert A. Baffi:]

Yes. Yes. So the facility that we've commissioned then we started GMP production in now for valrox would be capable of producing 2,000 patient use (30

[Unknown Speaker:]

Okay. Great. Thank you so much.

[Jean-Jacques Bienaimé:]

Yeah. So, I mean, obviously, we already are looking at plans to expand capacity, not only to be able to treat more than 2,000 patients per year with hemophilia A but also be able to provide clinical supplies and then commercial supplies for other potential gene therapy candidates. And Hank mentioned PKU, that might be one of them down the road, but there are other potential ones. So that's something we'll be watching closely. And actually even the current facility, and correct me if I'm wrong, Robert, and I think we could probably expand it a little bit and go a little bit beyond 2,000 patients. But if we only try to beat (32

[Unknown Speaker:]

Great. And if I can sneak in one more quick question, since you mentioned the next gene therapy candidates, can you give us a little bit more clarity on when we might hear about what it is?

[Jeffrey Robert Ajer:]

We said that Friedriech's Ataxia is our next IND that we intend to file and we've said that we plan to try to roll out an IND every year or so, so I'd say probably a year.

[Unknown Speaker:]

Okay. Great. Thank you.

[Operator:]

Your next question comes from Andrew Peters with Deutsche Bank.

[Carlos Solorzano:]

Yes, hello. This is Carlos in for Andrew. Thank you for taking our question and congrats on the progress. My question is regarding BMN 290, the new candidate, and we're just curious from a process perspective how you think about you know which of the early-stage programs to bring forward. And, for example, is BMN 290 for this long (33

[Jeffrey Robert Ajer:]

Yeah. Yeah. And we have a governance process here that looks at the science side of the equation, as well as the business side of the equation, really driven first and foremost by the science. It's a terrible disease for which there's no current therapy, and there really isn't very much on the horizon. You understand the molecular basis of the disease with some degree of precision. We have a pharmacological agent that is targeted at exactly the root cause of the disease. We've done a lot of optimization of that pharmacological agent to ensure that it penetrates into all the issues that are relevant. So, yeah, pretty complex, fulsome scientific checklist that the asset had to hit. And then in addition at BioMarin, we take into consideration competitive considerations, business considerations, IP considerations. And we say we want to make an IND every year that doesn't mean there's a – that when the year passes, that we'll take anything we got. The asset has to pass through all of the strains (34

[Jean-Jacques Bienaimé:]

But it's indeed (34

[Carlos Solorzano:]

Okay. Thank you. That's helpful. And maybe if I could sneak another one in. From your market research for vosoritide, how important do you think the proportionality benefit is. And also given that you'll start a program in younger children now, what do you think is the degree of asymptomatic hypertension that you think is acceptable from a benefit risk perspective? Thank you.

[Jeffrey Robert Ajer:]

Well, the level of asymptomatic hypertension that's been observed in the trial overall is in four patients – five episodes in four patients out of 1,000 doses or whatever that number is. So that level is clearly acceptable. We have IRB approvals, regulatory approvals. And so that probably...

[Jean-Jacques Bienaimé:]

Yeah. And we did not even see that they were drug-related.

[Jeffrey Robert Ajer:]

And it's not included that they're drug-related because as you were hearing, you know that two occurred during micturition (36

[Operator:]

Okay. Your next question comes from Salveen Richter with Goldman Sachs.

[Kerry Tang:]

Hi. This actually Kerry on the line for Salveen. Thanks for taking my questions and congrats on all the commercial and pipeline progress. I have two questions. First, now that Brazil has announced that they will be placing the order in the fourth quarter, would it be fair to say that this pattern fits in the usual choppiness seen in the last two years? And also, where would this put BioMarin in terms of a full-year 2017 guidance? I think you mentioned on the R&D Day that missing that order would put you in the low end now. Does that put you in the midrange now? And just one follow-up question on the MPS IIIB program. When should we expect to see the next clinical update? And do you expect to run a pivotal study? Thank you.

[Henry J. Fuchs, M.D.:]

Maybe I would address the pattern of orders from Brazil MOH, which have been all over the place. So to Alethia's question, I responded sometimes the Ministry of Health orders for three months, sometimes for five months or even longer, and there doesn't seem to be any predictable pattern on that. And so I would expect going in to 2018, and with this order in process, we should expect to see continued lack of a pattern of ordering. In terms of the revenue guidance, maybe I'll turn that over to Dan.

[Daniel K. Spiegelman:]

Yeah. Sure. So with the order we have, and, of course, we don't know what the rest of the quarter is look like from Brazil, but with that order in hand and our expected revenues, that's why we were able to sort of frame up slightly the lower end of the total range from $1.285 billion to $1.290 billion (39

[Kerry Tang:]

Thank you. And answer the question on the when more data on it...

[Jeffrey Robert Ajer:]

Yeah. So just to remind me, just take a little bit of a step back, we showed it at R&D Day in the first three patients that we've normalized heparan sulfate levels, normalized liver volume, which has increased pathologically in MPS IIIB but under treatment normalizes, and we shared two out of three patients had stable or improving cognitive function as measured by the Development Quotient. We're completing enrollment in the feeder study called 901 (40

[Operator:]

Your next question comes from Joseph Schwartz with Leerink Partners.

[Joseph P. Schwartz:]

Great. Thanks very much. So looking ahead to the pegvaliase launch, I was wondering if you could highlight what the key learnings were from the early Kuvan experience, and are there any that are relevant to pegvaliase, and how do you expect the trajectory of pegvaliase to compare?

[Jeffrey Robert Ajer:]

Hi, Joe. The first thing I would mention is the Kuvan launch is now many years ago. We're in our 10th year. So probably not a lot of learnings from the early Kuvan launch. What we can tell today is that we're continuing to have an effect on how PKU is viewed and managed by clinicians. And the biggest force at work there is the negative impact of elevated Phe levels on the brain, which manifests itself in cognitive and other problems. So we're really making progress on that. And I would see pegvaliase as a more powerful therapeutic agent than Kuvan, initially for adults is being a very powerful commercial tool in the hands of clinicians in kind of the context of really believing that lower Phe is better for all PKU patients including adults these days. I would highlight the fact that a couple of years ago the ACMG updated guidelines in the United States called for treatment for life including adults and target Phe levels of less than 360 umol/L. Earlier this year, the Europeans just issued European treatment guidelines for PKU also calling for treatment for life and target Phe levels in Europe of less than 600 umol/L. All of which is really consistent with all of the work we've been doing trying to impact the way PKU is treated. As for trajectory, one of the things that will impact trajectory for pegvaliase is the important process of both induction and titration. So it takes a little while to get inducted and titrated to a maintenance dose, patients in the clinical trial have indicated very, very powerfully that the time spent and the effort spent was well worth the effect. We know that our clinical trial investigators both believe that and are realistic about how many patients they can move through that induction and titration period, the maintenance dosing at one time. So there was a lesson there and an expectation it would be, but the trajectory will be gated by clinics' ability to manage patients through that induction and titration to maintenance dose process.

[Jean-Jacques Bienaimé:]

But I think through the – the Kuvan is 10 years old now, but I would say now the PKU medical community has learned to live with therapeutic intervention for the treatment of PKU. When Kuvan was launched, it was a purely – it was a disease that was purely managed by dietitians within the PKU clinic. So I think this is definitely a different world now. And, I mean, thanks to the commercialization of Kuvan, in this respect, I think the prescribers will be responsive to a new therapeutic intervention.

[Jeffrey Robert Ajer:]

Especially when it's not indicated as an adjunct to medical nutritional therapy.

[Jean-Jacques Bienaimé:]

Exactly. And that is why we believe it's a product, if approved, there will be significant demand for the product even if the first three to four months of therapy are a little complex and the titration just take time. I think eventually, based on what we're hearing from patients that have been on the drug for several years now, I think there's going to be a lot of interest in this product.

[Operator:]

Your next question comes from Chris Raymond with Piper Jaffray.

[Christopher Raymond:]

Hey, thanks. Just another pegvaliase question, if you don't mind. So I'm just curious, what would be the barriers to starting a pediatric trial now, or at least a pilot now, versus waiting for approval in adults? Is this driven by FDA's direction or is this a company-driven decision? And I guess, along the same line, I'm sure you guys have thought about an induction and titration sort of pathway in a pediatric setting. Could you maybe describe what the differences might be versus adults? Thanks.

[Jeffrey Robert Ajer:]

Company-driven decision, and given that we have a PDUFA date that's not too many months in front of us. Might as well (46

[Jean-Jacques Bienaimé:]

But I mean, that is definitely an area that you're achieving. Again, we get green light for approval, that is definitely something we're going to be investing in. And maybe we're not – we're going to do it by stage, probably, like we're planning to do it for hemophilia, for instance. We might not go all the way to very young children with our first trial. We might probably start with teenagers and go down, and then learn. That's kind of the way we're going to learn how to best address them, going slowly younger and younger in age, how to best address the much – the younger population.

[Operator:]

Your next question comes from Ying Huang with Bank of America.

[Aspen Mori:]

Hi. It's Aspen on for Ying. Thanks for taking our questions. First off, can you give us more detail on the one BMN 270 patient on 4e13 who's showing weaker Factor VIII expression, and what might be keeping him or her from realizing the results achieved by some of the other patients on trial? And then, can you discuss some of the data, preclinical or otherwise, that you've seen that gives you confidence in the vosoritide taller (47

[Henry J. Fuchs, M.D.:]

Yeah. So, to the best of our ability to identify the difference between the patient who was the lowest Factor VIII expression in the 4e13 dose cohort versus the 6e13 cohort is really dose. We haven't put our finger on the pulse of a specific patient characteristic. It doesn't appear to be preexisting immunity, it doesn't appear to be related to a immune response to the capsid, and so they probably are in factors that are intrinsic to individual patients that we just don't fully understand that explain variability in response. But to remind you, we see variability in response, not just in our own studies in humans, but also in our preclinical studies and in the preclinical and clinical studies of other gene therapies in the hemophilia space. So, we expect that this is really a patient characteristic that we just don't fully understand. And as far as...

[Jean-Jacques Bienaimé:]

Let me – and just want to remind you where we were 18 months ago or so when we started this program. We were hoping to get to 5% Factor VIII expression, and here we had a majority of the patients that are basically within normal Factor VIII range here, and we have one patient that went from severe hemophilia, at less than 1%, to over 5%. So, transformed that patient from severe hemophiliac into a mild hemophiliac, which is already a major – even for a patient who is not really responding, so a major improvement for this patient. So that's just a perspective on the data. Right, Hank.

[Henry J. Fuchs, M.D.:]

And then, what evidence is there that proportionality could be corrected pre-clinically and clinically, so pre-clinically, if you take a Achondroplastic dwarf mouse and mate it with an acromegalic CNP over-expressing mouse, the F1 of that cross is normal typically, meaning they'll have a statural abnormality or the portionality abnormalities. So that in itself says that you can correct proportionality defects if you start from day one of embryogenesis. And then, human clinical data indicates that CNP over-expression is associated with an overgrowth phenotype, and presumably the earlier you apply CNP to the Achondroplasia situation, the better your proportionality outcomes will be. And then finally, in 8 year old patients who've been treated for two and a half years, we see a trend in favor of improved proportionality, which is about as good as we could expect to see, based on preexisting abnormality and proportionality. So I think all the lines of evidence point to, we're going to improve proportionality and really, it's a matter of when and how, and that's going to be driven as a function of how early you can start treatment.

[Operator:]

Your next question comes from Tim Lugo with William Blair.

[Tim Lugo:]

Thanks for the question. I remember back when Kuvan was initially launched, there was a lot of the – PKU patients weren't necessarily captured front in the healthcare system, and weren't complying with any food regimen or diet, even though they weren't on any effective therapies. Could you maybe contrast what the community is – the current status of the community ahead of this pegvaliase launch, versus what we saw with Kuvan a couple of years ago?

[Jeffrey Robert Ajer:]

Great question, Tim. So I might refine your characterization a little bit and say that most of pediatric patients, then and now, are pretty actively managed in the clinic. You could round that off and say essentially, all pediatric patients are. And where you see the disconnect of loss to follow up or out of control PKU patients that are not actively managing their PKU, maybe not actively seeing a PKU clinic, are the adult population. So we've been working for years to try to address that situation, both because Kuvan is a good therapeutic option for adults, as well as pediatric patients to respond to Kuvan, and also knowing that a more powerful therapeutic option is potentially active, and all adult the patients was coming through the pipeline. And so what I would say is there's been incremental progress made during these last several years in both hanging on to pediatric patients as they transition into adulthood, doing a better job of not losing them to clinic follow-ups. And also, we've been very active in working with clinics to try to recapture adult patients that have been lost to follow-up for some time and we've seen some success with that. Maybe the most important thing is the kind of acknowledgement or awareness of the PKU clinicians that it is important to be following PKU patients well into adulthood. So that kind of shift in mindset has been really positive. So I think that we're really well-positioned with pegvaliase now under review in the U.S. to have a very robust adult PKU population to launch into.

[Operator:]

Your next question comes from Jeff Chen with Cowen & Company.

[Jeff Chen:]

Hi, good afternoon. Thank you for taking my question. Just coming back to Brazil, can I confirm with you that was the Brazil order all catch-up in what was expected in Q3 for both Naglazyme and Vimizim, or were there any forward buying?

[Jeffrey Robert Ajer:]

Not seeing any forward buying. So we were expecting an order from the Brazil Ministry of Health in the third quarter that didn't materialize. That order is now firmly in motion. And as I stated earlier, Brazil Ministry of Health places consolidated orders, sometimes those orders are for several months, sometimes for longer periods of time variability around that.

[Jean-Jacques Bienaimé:]

But this order specially was not a multi-quarter order.

[Jeffrey Robert Ajer:]

Go ahead. Yeah

[Jean-Jacques Bienaimé:]

If that was your question.

[Operator:]

Okay. Your next question comes from Kennen MacKay with RBC Capital.

[Unknown Speaker:]

Hi, this is Paul (54

[Daniel K. Spiegelman:]

Just let me confirm the question was Alexion reported that they're believing that Latin American countries that they've previously considered growth markets they now no longer consider them growth markets, have I got that correct?

[Unknown Speaker:]

Yes, that's correct.

[Daniel K. Spiegelman:]

Yeah. So I mean, Latin American markets have been and will continue to be important markets for BioMarin. I mentioned earlier our major markets in Latin America Brazil, Argentina, Chile, Colombia and Mexico, they will continue to be important. I also mentioned earlier this due to the high prevalence of MPS VI in Brazil – Brazil was historically a bigger percent of our sales than it is today and that we expect that drop in sales concentration to continue to decrease. So remember earlier we said five years ago it was 15%, today it's 7% and probably continuing to decline. But Brazil will be an important market and we still expect revenue growth going forward in Brazil and other Latin American markets.

[Jean-Jacques Bienaimé:]

And as you – we're seeing significant growth in this year even in Latin American countries outside of Brazil like Columbia, Chile, Argentina and even Mexico. So this (56

[Operator:]

Your next question comes from Gena Wang with Barclays.

[Gena Wang:]

Thank you for taking my questions. I have two sets of questions. First one is for the PKU franchise. So for patient currently on Kuvan, what is the breakdown of pediatric patients and adult patients, and how do you see generic Kuvan affect your PKU franchise? My second question is regarding the BMN 290. So BMN 290, can you help us understand mechanistically how BMN 290 can reacetylate histone that specifically lead to for toxin (57

[Jeffrey Robert Ajer:]

Okay. So maybe starting with the PKU suite of questions. I don't know that we have previously disclosed the mix of...

[Jean-Jacques Bienaimé:]

Pediatric.

[Jeffrey Robert Ajer:]

...pediatric to adult patients. Maybe we have in a public forum, so confirming that's roughly 80/20 pediatric to adult patients. Remember that our drug is based – dosed on weight. So even though the 80/20 in terms of numbers of patients, it's undoubtedly less than 80/20 in terms of revenue between those populations. And then in terms of generics, what's the impact of generics? Well, we have exclusivity through late 2017 in the U.S for...

[Traci McCarty:]

2020.

[Jean-Jacques Bienaimé:]

2020

[Jeffrey Robert Ajer:]

Sorry, 2020 in the U.S., 2024 in EU. So we have some period of time before we have to face generic situations. We don't know exactly what that's going to look like. There are no good analogs to model this after so there are no good examples of highly specialized drugs that have very controlled distribution networks going generic. So roughly we anticipate there will be some material impact from generics, but probably less than cataclysmic loss of market share. And beyond that we don't really know.

[Henry J. Fuchs, M.D.:]

And then on BMN 290 what we reviewed at R&D Day and in the R&D day slides is that nuclear genetics material exists in two states in open chromatin state and closed chromatin state, and there is reversibility or bidirectional movement between those two states. In the triplet repeat disorder Friedreich's Ataxia. For reasons that aren't particularly crystal clear, there's a preponderance of nuclear material that appears in the condensed chromatin state that is a reflection of a relative excess of histone deacetylase activity relative to histone acetyltransferase activity. And so the concept is to augment that reversal to the open chromatin state driven by histone acetyltransferase by blocking the enzyme which takes open chromatin to closed chromatin, and that enzyme being histone deacetylase. So the molecular basis for increase in frataxin regulation is to open the chromatin and allow normal transcription to ensue. And as far as relative selectivity of the approach, we've demonstrated that for example the activity of the inhibitor has allelic preference, meaning it hits the Friedreich's alleles that leaves the normal frataxin locus intact. And that suggests that it's widespread – no, that it will not have very much widespread activity in regard to blocking (1

[Operator:]

Okay. And your next question comes from Vincent Chen with Bernstein.

[Vincent Chen:]

Thank you very much for taking my question. Two more on gene therapy. First, the question on COGs. We hosted a recent gene therapy manufacturing seminar and our experts emphasized that gene therapy production is extraordinarily expensive, well into the six figures for higher dosed systemic gene therapies made in mammalian cells. I understand baculovirus should be less costly per vector genome, but how should we think about potential COGs for valrox? And then I have a quick follow up afterward.

[Jean-Jacques Bienaimé:]

I mean, you – I'll make a few comments. Right now, our – (1

[Vincent Chen:]

Okay.

[Jean-Jacques Bienaimé:]

Do you want to add anything? Maybe Robert you want to add a few more comments to this.

[Robert A. Baffi:]

Yeah. There's a – when we decided to go with the baculovirus system, as you alluded to one, of the advantages is it is less costly than using mammalian human cell lines. As a variety of other advances just being able to scale up to 2,000-liter scale which we're already at, it could even go larger than that on a lenius side. So I think as we get more experience with this as we've done with our other products we can develop robust manufacturing processes, purity levels and cost of goods and have all those come together in our production systems.

[Jean-Jacques Bienaimé:]

And again, I would say that we believe – and as Robert said, we selected the baculovirus specifically for – one of the reasons why we selected it is it is easier to scale up than in mammalian system. So I would say maybe the comments you made are more appropriate for our competitors than for us.

[Operator:]

This concludes the Q&A portion of today's call. I would like to turn the call over to Mr. J.J. Bienaimé. Please go ahead.

[Jean-Jacques Bienaimé:]

Thank you, operator. So we certainly achieved a tremendous amount in the first three quarters of this year, and I want to thank all BioMarin employees whose hard work and dedication has contributed to significant progress in 2017 so far. We are currently launching our sixth commercial product with Brineura, our Phase 1/2 with BMN 270, and for BMN 250 for MPS IIIB and preparing to start clinical studies for Friedreich's ataxia in the second half of next year. So as we look forward to the remainder of 2017 and the start of 2018, we are energized to be preparing to begin enrollment in our Phase 3 program with valrox for the potential one-time treatment of severe hemophilia A. And with pegvaliase, our next potential product approval is just around the corner with the anticipated FDA action expected in the first half of next year, and the submission of our filing in EU for approval in the first quarter of 2018. So as we shared today, we anticipate a major data readout in 2019 with both valrox for hemophilia A, and vosoritide for achondroplasia, both potential billion dollars opportunities. The R&D organization continues to execute on parallel level while we are moving towards profitability, which is a significant accomplishment for a company our size. I'm very proud of my management team and all BioMarin employees for their contribution. I want to thank you for your continued support and for joining us on today's call, and we look forward to providing updates on the many programs moving forward over the coming months. Goodbye.

[Operator:]

This does conclude today's conference call. You may now disconnect.